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EfTEN Real Estate Fund III announces second public offering of shares
A public closed-end alternative investment fund EfTEN Real Estate Fund III AS announces public offering of shares with a minimum investment of 1000 shares per investor and with issue price 11,0378 euros per share. Maximum limit of capital to be raised is 11 million euros. Subscription period is March 30 – 16:00 April 15, 2016. Public offering of shares is organised by fund manager EfTEN Capital AS and subscription is organised by Estonian Central Securities Depository’s account operators.
EfTEN Real Estate Fund III AS is first fund that will make investments to large-scale real estate projects accessible to retail investors. Fund’s initial public offering of shares in June 2015 attracted 160 investors and in total 13,8 million euros of share capital was raised.
According to EfTEN Real Estate Fund III AS’ fund manager Viljar Arakas, the Fund invests into commercial real estate in the Baltic States with strong and stable cash flow. „We decided to set maximum limit for subscription, because we wish to raise capital in reasonable amounts so that we would be able to invest it within 6 – 9 months, then raise another round of capital to be invested. Our investment strategy is conservative and fund’s goal is to provide our investors stable dividend yield and capital growth,“ said Arakas.
All four working partners of the fund manager and seven EfTEN’s original seed investors from 2008, are among EfTEN Real Estate Fund III AS’ shareholders, according to Arakas. „In total 47% of Fund III shares are currently owned by EfTEN Capital AS’ shareholders – we invest under the same conditions into the Fund that we offer to retail investors. This is an important principle for us,“ added Arakas.
According to Arakas, due to combined effect of decreasing cash flows and growing yield levels, commercial real estate is significantly cheaper today compared to what it was, for instance, a decade ago, in peak of the last boom in 2007. „If we compare Baltic States commercial real estate market to Scandinavia, then in Baltics the yield levels are up to twice the average of Scandinavia, but the interest costs of bank’s financing are the same. Therefore return on equity is more than twice as profitable. Signs refer that we can expect commercial real estate market to go up and if that should happen, it is only positive for the investors. However, it is important to emphasize that the Fund does not speculate on future growth of real estate prices. We are focused on attractive returns from stable and strong cash flows,“ said Arakas.
The Fund’s dividend policy is straightforward, according to Arakas. „From annual free cash flow we pay 80% out in dividends. Once we have invested the capital, investor can expect annual dividend rate of 4 – 8%. With euribor rates declined to zero, the annual payout is bigger than in situation when euribor rises to 2-3%. Against this we plan to protect ourselves with fixing the interest rate,“ added Arakas.
The Fund’s leverage, according to prospectus confirmed by Estonian Financial Supervision Authority, is limited to a maximum of 65 percent of the total value of real estate transactions. Percentage of share capital in each new investment is 35% or more. Annual expected capital return is 15%. EfTEN Real Estate Fund III AS is not a guaranteed fund.
The capital raised with the first public offering of shares in June 2015 has been invested in Saules Miestas, shopping mall situated in the heart of Lithuanian city Šiauliai and Ulonu business centre in Vilnius, capital of Lithuania.
EfTEN Real Estate Fund III AS invests in commercial properties and limited-scope development (retail, office, logistics and hotels) or related securities in Estonia, Latvia and Lithuania. The fund is suitable for investors with a long-term investment horizon who want to benefit from the regional commercial real estate market outlook, attractive returns from stable and predictable cash flows and moderate capital growth.
Regulated by Estonian Financial Supervision Authority, EfTEN Real Estate Fund III AS term is 10 years, divided into 3 year investment period, 5 years holding and 2 years for exit. The Fund will potentially be listed in Baltic Stock Exchange market after investments period.